Credit Worthy News

Credit: Chicago Athletic Association

In Chicago, everyone is invited to be part of the club.

The first half of 2015 has seen a rash of new boutique hotels open in iconic Chicago buildings that were purpose-built to be exclusive to members and account holders only. Today, you don’t have to be a member to book a room at the Chicago Athletic Club Hotel, the Hampton Inn in the Chicago Motor Club, or Virgin’s first hotel in the Old Dearborn Bank Building.

Accommodating the 21st Century Traveler in 19th and Early-20th Century Buildings

These historic building conversions are part of an international trend towards boutique hotels. As the industry heats up with the economic growth experienced over the last few years, hoteliers are focusing on a new strategy to accommodate a new type of traveler. These consumers prefer authenticity to consistency. They want to Instagram photos of architectural detail and eat among locals in hip and trendy restaurants. And what better marketing tool for hotels than historic buildings that provide a sense of place to their guest?

Chicago hotels are also benefiting from growth in the manufacturing and high-tech sectors and the business travelers attached to them. According to the “World Business Chicago” 2014 Annual Report, the last year saw 21,700 new jobs bolstered by companies like ADM, Braintree, Wanda Group and Yelp, and included $6.8 million in investment.

Tourism is, of course, a major factor in the success of the accommodations sector. According to some estimates, 60 percent of hotel developments have taken place in the north Loop/Michigan Avenue, where millions of tourists visit this area each year drawn by its proximity to Chicago’s Gold Coast and Magnificent Mile shopping area.

Financial Incentives for Hotel Conversions

According to a March 2014 New York Times article, the National Park Service estimates that 4.5 percent of all federal historic tax credits (HTCS) are used for hotel conversions in historic buildings. In Chicago, this 20 percent tax credit can be coupled with the Class “L” Property Tax Incentive that reduces assessment levels for 12 years. (In many other states, the federal HTC can be paired with state HTC programs.)

These financial incentives also provide inherent benefits to the community at-large. In most cases, historic tax credits make these hotel projects feasible for the developer and encourage sensitive preservation of historic landmarks in cities across the country. Hotels, in particular, also provide a mix of economic benefits that include generating substantial sales, room and property taxes and creating direct and indirect jobs.

The Value of Historic Consulting

MacRostie Historic Advisors (MHA) provided historic consulting to many of the most talked-about Chicago hotel conversions in 2015. Among the services provided were:

historic research that helped to provide the project teams with photos and documents that allowed for sensitive restorations of architectural detail,

federal historic rehabilitation certifications for these hotels that allows for the projects to obtain the federal HTC,

and Class “L” eligibility applications that allows for the reduction in property assessment values.

Our MHA Midwest team, based in Chicago, worked closely with our partners to ensure the success of these projects that relied heavily on historic tax credits.

This Venetian-Gothic 1893 Henry Ives Cobb creation was home to a private athletic club for men (and in the late 20th century, women) of the Chicago elite until 2007. AJ Capital Partners and Commune Hotels & Resorts took ownership in 2012 and transformed the intricately detailed structure into a 241-room hotel that opened in May. The rehabilitation restored bas-relief woodcarving elements, 19th century stained glass, ornate marble staircases and the terra cotta façade.

Credit: Nick Fochtman / Curbed Chicago / Virgin Hotel

Completed in 1928, architects Rapp and Rapp designed the neoclassical structure to be an office building for the Old Dearborn Bank. Despite the unfortunate timing of opening just before the Great Depression, the 27-story building has survived the greater part of a century and was acquired in 2011 Virgin Hotels (Virgin Group) as the company’s first hotel venture. This contemporary 250-room hotel retains the 1920s oak cigar bar, brass elevator doors in the lobby, and the original tiled ceiling. The crown jewel in the project is undoubtedly the reinstatement of the two-story lobby, the original banking hall that had been divided into two floors in the 1950s to accommodate more office space. Following rehabilitation guidelines that are intrinsic to the historic tax credit process, Virgin was able to creatively weave together modern touches with historic details to create a truly spectacular experience.

Credit: chicagoarchitecture.org

Before the days of AAA, the Chicago Motor Club was a haven for early motorists. This 1928 Art Deco gem was designed by Holabird & Root, and the 17-story building now houses 143 rooms. A great deal of attention was paid the historic aspects of the building, including details in the three-story lobby such as the original John Warner Norton 29 foot wide road map. A 1928 Model A was even installed on a mezzanine as a nod to the year the building opened. Rehabilitation included careful restoration and repair of exterior terra cotta, stone, and limestone. The architecture team at Hartshorne Plunkard created an exquisite LEED certified design throughout that preserved the historic features of the building.

It’s a decidedly good time to be a traveler in Chicago. It is more about the destination than the journey for once, and that is because developers see the value in historic structures, made even more valuable by the generous incentives of historic rehabilitation tax credits.